Biden’s proposed gas tax holiday leaves many skeptics, from economists to environmentalists

President Biden on Wednesday asked Congress for a three-month federal gas tax break. With the goal of bailing out the high gas prices caused by Russia’s invasion of Ukraine, this policy has raised a lot of skepticism.

If Congress passes the tax exemption, the current federal fuel taxes of 24 cents per gallon on gasoline and 18 cents per gallon on diesel will be suspended through September. contributing to the Interstate Highway Trust, Biden has also asked Congress to find alternative funding sources so it won’t be impacted, according to a White House fact sheet.

According to the White House, the average price of gas has increased by $2 per gallon since Russia began its invasion of Ukraine. After passing $5 per gallon a week ago, the national average pump price dropped to about $4.96 for regular gasoline, but California stands at $6.37.

White House, Washington, DC [Creative Commons license by dcjohn]

But a long list of skeptics believe that reducing gas taxes is not the right policy to tackle the problem. When some states have suspended their gas taxes in the past, that actually leads to higher fuel prices, according to a recent study by the Wharton School of the University of Pennsylvania. Bloomberg.

According to the study, when Maryland instituted a month-long tax holiday, prices dropped, but then spiked after the tax holiday expired on April 17. Research shows that prices ended up high, according to the study. than the price without the tax holiday, costing Maryland about $100 million, according to Bloomberg.

The US Public Interest Research Group (US PIRG) also opposes the federal gas tax holiday, arguing that it ignores the main issue of reducing dependence on oil.

Traffic in Atlanta, Georgia during rush hour (via Wikimedia)

“The current spike in gas prices is just the latest reminder that our reliance on oil has left us in the water,” said US PIRG environmental campaign director Matt Casale in a statement. price increase”. “We need more than a gas tax holiday — we need transportation solutions that really don’t make us more dependent on cars and oil in the long run.”

There is also no guarantee that the tax savings will reach consumers, the American Society of Civil Engineers noted in a press release. The team cited analysis from the American Association of Road and Transportation Builders. The Association’s advocacy group – the Transportation Investment Advocacy Center – found that on average, one-third of a state’s gasoline tax increase or decrease is passed on to consumers through changes in retail prices. on the effective date of the tax rate change, with no significant effect thereafter.

The debate also overshadows the fact that the current gas tax is not enough to fund road repairs. In 2018, the American Chamber of Commerce endorsed gas tax increase 25 cents to finance road repairs, something even tax-averse President Trump endorses. Meanwhile, some states have found ways to electricity tax used to charge electric vehicles like gasoline as a way to increase additional revenue from those vehicles.